Earlier this year, the National Retail Federation (NRF) issued a forecast, anticipating retail sales to grow between 6 percent and 8 percent to more than $4.86 trillion in 2022. In addition, non-store and online sales year-over-year, which are included in the total figure, are expected to grow between 11 percent and 13 percent to a range of $1.17 trillion to $1.19 trillion as consumers continue to utilize ecommerce.
The restaurant industry is also seeing encouraging growth numbers: the National Restaurant Association forecasts the industry to reach $898 billion in sales in 2022, eclipsing last year’s numbers by nearly $1 billion. While this is exciting news for IT solution providers who sell to these markets, their opportunities lie in identifying the challenges retailers and restauranteurs face and aligning the right B2B technology solutions and services to address those needs. To help with that, we spoke with several industry experts to get their insights.
What are retailers’ biggest challenges today, and how can solution providers solve them?
“Now perhaps more than ever, retailers need to know where products are within their stores to maximize availability,” says Duane Roebuck, Sr. Marketing Channel Manager – Retail and IoT at BlueStar. “Gone are the days when they could simply re-order stock and expect a timely arrival to compensate for inefficient inventory practices and shrinkage. Instead, companies are looking at leveraging technology such as RFID to locate all available products, maximizing sales and improving the customer experience. However, nailing online inventory is a challenge that even tier 1 retailers have struggled with. Although solid technologies exist to address both problems, associate training remains a crucial gap across the industry. Solutions providers should focus on training to refresh veteran employees and help onboard new ones.”
Inflation and labor shortages
“Inflation and economic pressures, the industry-wide labor shortage and changing consumer shopping preferences are among the most challenging trends retailers face today,” says Dan Lydigsen, Director of Retail & Hospitality Sales at Brother Mobile Solutions. “Unfortunately, these pressures may not let up on the industry anytime soon. Despite today’s difficult situation on many fronts, IT solutions providers that focus on delivering solutions to help retailers adapt and attract more customers will be well-positioned for long-term success.”
Self-checkout and price checks
“The Great Resignation has forced retail organizations to work smarter and get the same (or more) done with fewer associates,” says Roebuck. “Self-checkout and price-checking kiosks are some of the low-hanging fruits for automating tasks that previously required a human. However, solution providers could be fighting the perception that these technologies are too pricey for small and medium-sized businesses, so demonstrating the path to positive ROI is crucial.”
“Omnichannel payments support is now table-stakes for retailers,” says Justin Zeigler, Director of Product at Datacap Systems. “Many retailers were caught off guard by the sudden change in consumer interaction in 2020 and rushed to implement alternative engagement strategies to stay afloat. Examples include adding ecommerce storefronts, employing buy online pickup in-store (BOPIS) and adding buy-now, pay-later (BNPL) options to attract new prospective buyers.”
“Shoppers continue to appreciate in-store experiences and being hands-on with products – but enormous online marketplaces have proven that shoppers are comfortable purchasing everything from clothing to food sight unseen,” says Roebuck. “Consumer expectation is that even small local retailers have their complete product offerings online and available to be ordered and held for pickup. In a recent survey BlueStar conducted with retail business owners, data migration and staff training were commonly cited as impediments to adopting new technology, so solution providers should have a plan to combat these objections.”
“Additionally, merchants must offer services to accommodate returns,” says Lydigsen. “These situations create an open door of opportunity for IT solutions providers to serve the retail marketplace.”
“But the rush to implement these solutions often means fragmented offerings from multiple providers leading to a frustrating experience for the merchant,” says Zeigler. “Often, merchants are forced to manage siloed reporting, billing, and support across multiple providers. Solution providers should focus on consolidating services for their merchant customers such that they’re the sole provider for all payment channels (in-store, above-store and alternative). This increases the revenue opportunities per merchant and protects the merchant relationship from being poached by third-party solution providers.”
Lydigsen adds, “Even with the challenges noted above, the retail market offers significant opportunities for IT solution providers. This industry has traditionally operated on thin margins, forcing store operations managers at large and small retailers to seek IT solutions that improve efficiency from the storefront to the back office, receiving dock and warehouse.”
What are restaurants’ biggest challenges, and how can solution providers address them?
Delivery aggregators cutting into profits
“The pandemic increased the demand for home food delivery,” says Roebuck. “Many restaurants that didn’t have their own delivery mechanism opted to engage third-party aggregators due to their reach, ease of setup, and crowd-sourced delivery. Still, they did so to the detriment of profitability.”
A more sustainable approach would involve sourcing flat fee online ordering systems and employing small but dedicated delivery teams whose cost would be less devastating to the bottom line, adds Roebuck.
“Hospitality technology firms would do well to establish referral programs with leading flat fee online ordering systems for restaurants whose POS systems don’t enable online ordering,” he says. “For those restaurants that do have the option to turn on online ordering, solution providers should provide white-glove services to activate, configure, and train restaurant management on how to operate their new module.”
Rising food costs and staff shortages
“Restaurant owners are fighting against growing overhead, food and labor costs and are frantically searching for opportunities to offset cost centers wherever possible,” says Zeigler. “For this reason, payment solution providers have leveraged surcharging and cash discount programs for merchants to mitigate the costs associated with payment processing. The widespread adoption of these programs over the past year has shown that cardholders are mostly willing (at least for the time being) to cover the additional fees at checkout.
He adds that this can be an effective strategy for merchants, assuming the program being implemented is compliant with rules laid out by the card brands. “However, many programs are floating around that add fees to prohibited card types and can turn a would-be cost savings opportunity for the merchant into a costly misstep resulting in substantial card brand fines. Confirm that the surcharging or cash discount program you’re implementing is compliant before recommending it to your merchant prospects.”
Roebuck adds, “With sharp rises in food and labor costs in the restaurant industry, it’s become increasingly important – as well as difficult – to provide top-notch customer service and food quality for consumers who dine out in our stressed economy. Restaurants looking for cost savings should consider adopting demand forecasting technologies and advanced inventory management. Automating food ‘use by’ labeling, self-ordering kiosks, and pay-at-the-table technologies are a few other solutions providers should offer their restaurant clients. Lastly, value-added resellers should consider creative financing options to help defer costs.”
What are some newer solutions you think solution providers should be offering their customers?
“With supply chain issues being what they are for the foreseeable future, RFID technology allows retailers, restaurants, and grocers to know where their products are so they can be placed in front of the consumer,” says Roebuck. “It can also be leveraged for loss prevention, delivery, product replenishment, and repurposing staff to do more high-impact, consumer-facing engagements.”
Alternative payments options
“With the nature of how we pay for goods and services evolving dramatically over the past couple of years, some of the biggest opportunities for solution providers today include alternative payments options that allow merchants to engage with their customer base during and after the sale,” says Zeigler. “Solutions like online ordering, curbside pickup, text-to-pay invoicing, self-service kiosks and omnichannel prepaid/loyalty programs are just a few ways for merchants to remove barriers between them and their merchant prospects.”
All these options have one thing in common, he adds. “They allow the merchant to gather and aggregate customer data to build proactive marketing programs to increase average spend per customer and grow their bottom line. Solution providers that can offer these programs and tell the story to their merchants as to how they mesh to build revenue and repeat business are seeing considerable growth today at the expense of providers that are simply filling orders.”
Programmatic out-of-home advertising
“Programmatic digital out-of-home advertising puts the physical storefront to work,” says Roebuck. “At no cost, retail businesses and property owners can place digital signs inside their buildings, on their outside-facing windows, and on their exterior walls to start generating ad revenue. The digital ads target pedestrians, vehicles, and in-store traffic that passes by the signs, and those ad impressions become profit for the retail business.”
Pricing automation solutions
“Forward-thinking IT solutions providers offering solutions that help retailers automate operations to move goods from store shelves to consumers’ shopping carts can reap big benefits from serving this marketplace,” says Lydigsen. “For example, at brick-and-mortar retail stores operating with limited staff, IT solutions can help automate processes such as pricing. By offering up-to-the-minute pricing, retailers are better positioned to collect the optimum amount of revenue which is critical to survival in today’s world. Technology solutions that are affordable and easy to deploy can help retail associates easily and accurately mark items up and down the aisle. These solutions also allow retailers to adapt quickly to changes and adjust for markdowns and promotions. Pricing is a powerful tool in moving retail inventory, and a wide range of IT solutions help retailers get the job done.”
He adds that pricing is just one example of the type of retail solutions that IT solutions providers can offer. “There are many similar solutions that help retailers automate and work more efficiently at the POS, the receiving dock and or the warehouse.”
Electric vehicle charging as a service
“Electric vehicle charging solutions turn parking lots into profit centers,” says Roebuck. “Data supports that most EV charging is done at home. Still, facilities such as grocery stores, theatres, travel centers, hotels, and other long-stay destinations should consider monetizing their parking lots by offering electric vehicle charging as a service.”
“A technology that is gaining traction is facial recognition,” says Roebuck. “For stores that sell controlled products such as firearms or cannabis, facial recognition can help maintain security and control store access. Facial recognition can also be leveraged for high-end boutiques and stores to provide exceptional customer service. Knowing that one of your top customers has arrived and greeting them appropriately could be the difference in retaining that customer due to the experience. It can also be leveraged in loss prevention, identifying individuals trying to return counterfeit goods.”
What are the biggest pitfalls IT solution providers must avoid?
Trying to be everything to everyone
“Many solution providers have a fuzzy picture of who their ideal customer is – which leads them to lose opportunities on several fronts instead of winning them at a high rate on just a few,” says Roebuck. “Create a strong picture of your ideal customers – their industry, size, and geography – and create offerings that align with their top challenges.”
Leading with components instead of solutions
“In years past, hardware devices were sold a la carte, leaving the end customer IT departments to piece together end-to-end solutions,” says Roebuck. “Proper value-add solutions that include software, hardware, and services. IT solution providers should proactively pursue partnerships with software providers to build and execute turn-key solutions.”
Selecting an unstable vendor
“With the recent unprecedented M&A activity in the industry, it can be easy to find yourself orphaned by your selected vendor(s) after an acquisition by an entity with a different idea concerning your role to the new business,” says Zeigler. “As a solutions provider, it’s critical to identify and select vendors focused on building a business with a long-term growth strategy as opposed to building an investment vehicle with an eventual sale as the only path to monetization. Make sure you are part of the go-forward vision before investing your time and resources in the offering. Of course, it’s impossible to predict this in all cases, but some due diligence and common sense go a long way. Look for VC investment, rotating C-level personnel, and non-sustainable business models as key indicators that a sale is part of the business plan. Adding diversity to your offering by reaching into new verticals is also an ideal way to hedge against this kind of risk. Finally, talk to your trusted vendors and ask for recommendations. Most are happy to make introductions to key partners.”
Lydigsen concurs, adding, “One of the biggest issues IT solutions providers face today is the lack of product availability. It’s a major concern for retailers needing affordable solutions to automate and better serve their customers right now.”
“Current supply chain issues, such as the lack of product components for manufacturing and disruptions in the movement of goods across global supply chains, are impacting the availability of some devices and hardware. These issues impact the ability for IT solutions providers to offer a turn-key solution.”
“Providers should carefully consider who they partner with and do their homework to identify vendors that offer reliable product availability. That way solutions providers can offer retailers the technology they need, along with the ability to implement these systems and put them to work quickly. A solution that isn’t available to end customers for 6 months or a year won’t do the trick.”
Final Tips and Closing Thoughts
“The most successful solution providers regularly and proactively communicate with their merchants to identify where they’re struggling and then work to implement solutions to improve their position,” says Zeigler. “Solution providers should maintain ongoing discussions with their vendor partners to ensure they’re aware of all available offerings and pricing models, so they can be prepared with turn-key options for their merchants as opportunities arise. Keep in mind that plenty of very well-capitalized providers are aggressively marketing a full suite of verticalized solutions to your merchants. Be there first.”
Roebuck adds, “Define your target market and conduct research to understand the market at a deep level. The provider who understands their customer the best often wins. Recognize that in 2022 and beyond, the cost of relying solely on outbound sales is unsustainable as a go-to-market strategy.”
Roebuck also suggests IT solution providers build a marketing organization that can create content their prospective customers love to consume and helps to establish their business as a heralded brand. “Doing this will build a pipeline of inbound opportunities that will close at a higher rate and progress more quickly,” he adds. “Finally, embrace new technology and software collaboration. Don’t get caught in the trap of doing things as they’ve always been. Instead, be observant of trends, evaluate the efficacy of new technology, and assess whether these new tools will be helpful to your customers.”